This article was published on Dec. 19, 2024, at 5:47 p.m. on the Chosun Biz Money Move (MM) site.
Hyundai Steel has begun preparations to issue company bonds worth hundreds of billions of won early next year. The company is currently in the stage of investigating how much of the issue can be absorbed by lead managers, with the market estimating it to be in the range of 300 billion to 500 billion won, similar to previous years.
However, with the Lunar New Year holidays in January and the political turmoil surrounding impeachment and the inauguration of the U.S. Trump administration, the company is said to be deliberating whether to issue the company bonds in January or move it to February.
According to investment banking (IB) industry sources on the 19th, Hyundai Steel is in contact with securities firms to issue company bonds between January and February next year. Typically, the lead manager for the bond issuance is selected at least ten days before the submission of the securities registration statement, and the issuance amount can be finalized before the preparation of the statement.
The market anticipates that Hyundai Steel’s bond issuance this year will be similar to previous years, amounting to between 300 billion and 400 billion won, potentially reaching up to 500 billion won. This is because the company has maintained issuance levels around that range annually. A debt capital markets (DCM) official at a securities firm said, “It would be good to issue 10-15% more than the existing maturing amounts to secure cash, but that can't happen while damaging interest rates, so it is likely that we will issue around 300 billion to 400 billion won, which is the level of preceding years.”
Hyundai Steel is internally deliberating on the timing of the company bond issuance. The company has regularly issued bonds in early January every year since 2007. Except for the bond issued in February 2009, the company has issued bonds every January due to the concentration of demand from institutional investors at the beginning of the year. High demand allows for relatively lower issuance rates.
However, next year, the company is considering issuing in February instead of January. The Lunar New Year holiday poses a significant hurdle. Unlike this year when the holiday was in early February, next year's Lunar New Year holiday begins on January 28. If Hyundai Steel issues bonds in mid-January as usual, it will start predicting institutional demand after January 10, which could result in institutional investors passing on it due to the holiday being just two weeks away.
An IB industry official explained, “Moreover, there is increased uncertainty in the financial market due to President Yoon Suk-yeol’s impeachment situation, making it difficult to predict where interest rates will go, and the Federal Open Market Committee (FOMC) meeting scheduled for Jan. 28-29 (local time) could also be a variable.” The official added, “The amounts coming out in the first quarter of next year will be similar to previous years, but the concentration phenomenon in January is likely to be alleviated to some extent.”
Furthermore, Hyundai Steel is one of the companies likely to suffer from the so-called “Trump trade” movement. When Donald Trump’s second administration begins, it is highly likely to strengthen the Tariff Act's Section 232, imposing high tariffs on imported steel products, which could further impact domestic steel companies already struggling against the onslaught of low-priced Chinese products.
Hyundai Steel has been facing deteriorating profitability due to the decline in steel prices caused by the increase in imports of Chinese steel. Therefore, since 2020, the company has been working to improve its financial health by increasing liquid assets and reducing liabilities. Additionally, it has decided to close its Pohang Plant 2 in North Gyeongsang Province and has been considering the sale of some subsidiaries, including Hyundai IFC, in efforts to evaluate competitiveness.
Considering this situation, the market believes there is a high possibility that Hyundai Steel will also appear in the company bond market in the second half of next year. This year, Hyundai Steel issued company bonds worth 300 billion won in September, marking the first time since 2021 that it issued company bonds in both early and later parts of the year.